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Insurers to Pay $1.1B in Medical Loss Ratio Rebates in 2023

Analysis  |  By Jay Asser  
   May 19, 2023

The pandemic continues to effect rebates, even if this year's figure pales in comparison to 2020 and 2021.

Payers will have to fork over about $1.1 billion in medical loss ratio (MLR) rebates across all commercial markets in 2023, according to Kaiser Family Foundation (KFF) research.

Under the MLR provision of the Affordable Care Act, insurers in the individual and small group markets must spend at least 80% of their premium income on healthcare claims and quality improvement efforts, with the remaining 20% going to administration, marketing expenses, and profit. For large group payers, the MLR threshold is 85%.

Insurers that do not meet the MLR threshold are required to pay back excess profits or margins through rebates to their beneficiaries.

Using preliminary data reported by insurers to state regulators and compiled by Mark Farrah Associates, KFF found that payers estimate they will issue over a billion dollars in rebates across commercial markets, $500 million in the individual market, $330 million in the small group market, and $250 million in the large group market.

The $1.1 billion in rebates for this year is larger than those issued in most previous years, but is well short of the record-high rebates of $2.5 billion in 2020 and $2 billion in 2021 due to the early stages of the pandemic.

The pandemic continues to influence this year's figure as MLR rebates are based on a three-year average, meaning 2023 will be calculated using payer financial data in 2020, 2021, and 2022. In 2020, cancelled elective care and individuals choosing to forego routine care resulted in health spending and utilization going down, KFF stated.

Payers had already set their 2020 premiums before the pandemic, which led to many being over-priced relative to the amount of care beneficiaries utilized.

"Another year of higher loss ratios in the individual market may foretell further premium increases in 2024, as some insurers will aim for lower loss ratios to regain higher margins," researchers wrote. "In recent years, insurers in all markets had experienced a great deal of uncertainty in setting premiums during the pandemic. Looking ahead to 2024, some of that uncertainty may continue, specifically relating to pent-up demand or the health effects of missed and delayed care."

Jay Asser is the contributing editor for strategy at HealthLeaders. 


Analysis by Kaiser Family Foundation using preliminary data reported by payers finds that insurers estimate they will pay $1.1 billion in rebates across commercial markets in 2023.

Insurers in the individual market are set to pay $500 million in rebates, while the estimates for the small and big group market are $330 million and $250 million, respectively.

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